EXPRESS: Two-Stage Newsvendor Network Problem: A Data-Driven Distributionally Robust Optimization Approach

We consider a multilocation newsvendor network in which historical data are the only available information about the joint demand distribution. To determine optimal inventory levels, we develop a novel data-driven two-stage distributionally robust optimization (DRO) model that does not assume the demand support is known. Instead, we infer the support from historical data using two prediction algorithms, which yield quantile-based and Mahalanobis-distance-based support estimates and therefore either ignore or capture cross-location demand dependence. Our objective is to minimize worst-case expected cost over an ambiguity set constructed from these support estimates, consisting of all probability distributions within a prescribed type-∞ Wasserstein (W ∞ ) distance of the empirical distribution. To approximate the second-stage recourse decisions, we employ a multiple-linear-decision-rule (MLDR) approximation that is provably asymptotically optimal. This leads to tractable linear programming (LP) and second-order cone programming (SOCP) reformulations for the quantile-based and Mahalanobis-distance-based formulations, respectively. We also establish support-aware finite-sample guarantees for the proposed framework. Numerical results show that quantile-based support estimation is more effective at maintaining reliable service levels, whereas Mahalanobis-distance-based support estimation yields larger cost reductions, particularly under correlated demand.

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Publication Details

Journal
Production and Operations Management
Published
2026-07-02
DOI
https://doi.org/10.1177/10591478261469015
Primary Topic
Supply Chain and Inventory Management
Type
article
Field-Weighted Citation Impact
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article

EXPRESS: Two-Stage Newsvendor Network Problem: A Data-Driven Distributionally Robust Optimization Approach

Lianmin Zhang, Daoheng Zhang, Hasan Hüseyin Turan, Daryl Essam et al.
Production and Operations Management
Supply Chain and Inventory Management
article

EXPRESS: Two-Stage Newsvendor Network Problem: A Data-Driven Distributionally Robust Optimization Approach

Lianmin Zhang, Daoheng Zhang, Hasan Hüseyin Turan, Daryl Essam, Shan Dai, Ruhul Sarker
article en

Abstract

We consider a multilocation newsvendor network in which historical data are the only available information about the joint demand distribution. To determine optimal inventory levels, we develop a novel data-driven two-stage distributionally robust optimization (DRO) model that does not assume the demand support is known. Instead, we infer the support from historical data using two prediction algorithms, which yield quantile-based and Mahalanobis-distance-based support estimates and therefore either ignore or capture cross-location demand dependence. Our objective is to minimize worst-case expected cost over an ambiguity set constructed from these support estimates, consisting of all probability distributions within a prescribed type-∞ Wasserstein (W ∞ ) distance of the empirical distribution. To approximate the second-stage recourse decisions, we employ a multiple-linear-decision-rule (MLDR) approximation that is provably asymptotically optimal. This leads to tractable linear programming (LP) and second-order cone programming (SOCP) reformulations for the quantile-based and Mahalanobis-distance-based formulations, respectively. We also establish support-aware finite-sample guarantees for the proposed framework. Numerical results show that quantile-based support estimation is more effective at maintaining reliable service levels, whereas Mahalanobis-distance-based support estimation yields larger cost reductions, particularly under correlated demand.

Production and Operations Management
Peace, Justice and strong institutions
Openalex Percentile: Top 5%
Supply Chain and Inventory Management
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